The researchers' investigations reveal caring for one person with late-onset dementia costs an average of £25,472 per year.

Currently, the bulk of this cost is met by people with dementia and their families.

Two thirds of these people live at home - either alone or with friends or relatives.

They said there were "marked variations" in the levels of provision and spending across the UK, and that care and support is "delivered piecemeal and in an inefficient fashion."

With every second ticking by, dementia costs the UK £539

Neil Hunt, Alzheimer's Society

Professor Martin Knapp, of the London School of Economics, one of the report's authors, said: "This research highlights the desperate need for dementia to be made a national priority.

"Current levels of services and support for people with dementia and carers are clearly inadequate.

"Dementia is one of the main causes of disability later in life ahead of cancer, cardiovascular disease and stroke, yet funding for dementia research is significantly lower than these other conditions.

"Even delaying the onset of dementia by five years would halve the number of related deaths, saving nearly 30,000 lives annually."

'Intolerable strain'

Neil Hunt, chief executive of the Alzheimer's Society, added: "With every second ticking by, dementia costs the UK £539. We can't afford to ignore the true cost of dementia to society as a whole.

"We must tackle this huge challenge head on."

"We need to invest in dementia services, research, support and training and use what money is being spent more effectively. Planning now will save lives and money in the future."

He added: "This new research shows that the government is failing to support people with dementia and their carers.

"Dementia will place an intolerable strain on our health and social care system unless the right services and support are in place."

Older people's tsar Professor Ian Philp, who is currently preparing new guidance for local health and social care bodies on early intervention and support for people with dementia, said: "This is a significant report that highlights the key issues around dementia and its economic impact."

Health Secretary Patricia Hewitt said: "We've already doubled the research that we're doing on Alzheimer's and just last week, we announced a new investment, for instance, in emergency respite care for carers of people with dementia, which is one of the things that carers particularly told us it was their top priority."

Two drugs companies - Pfizer and Eisai - are currently seeking a judical review with the aim of over-turning a National Institute of Health and Clinical Excellence (NICE) decision not to recommend the use of three drugs for patients in the early stages of Alzheimer's disease.

NICE ruled that donepezil, rivastigmine and galantamine should only be used to treat Alzheimer's once it has progressed to its moderate stages.